The hidden costs of low employee engagement — and why CEOs should care

Employee engagement is often treated as a “nice to have”. Something HR looks after. Something soft. Intangible. Secondary to the real drivers of business performance. But that thinking comes at a cost.

As Laurina Qvarnström, Head of Advisory & Delivery at Winningtemp, knows from working with leadership teams across industries that this mindset is costing companies far more than they realise.

“Disengagement isn’t just a people issue. It’s a leadership issue and a business risk.”

Laurina and her advisory team work with execlosely with executive teams across industries to turn employee feedback into meaningful action. It gives her a sharp understanding of what lifts performance, and what quietly erodes it when engagement isn’t addressed.

“It’s common for senior leaders to see engagement as something intangible, something that sits with HR,” Laurina explains. “But the consequences are very real. Disengagement drives costs, lowers productivity, and slows growth.”

Research supports her point. Gallup reports that companies with highly engaged teams enjoy 23% greater profitability and 43% lower turnover. Meanwhile, disengagement shows up in ways that hurt your business: absenteeism, conflict, rising recruitment costs, and stalled innovation.

If you’re not measuring or acting on engagement, you’re not just missing an opportunity. You’re exposing your business to risk.

Three hidden costs of disengaged teams

So, what does disengagement actually cost an organization? According to Laurina, it hits hardest in three places:

1. Conflict and wasted time

“In disengaged workplaces, managers can spend up to 40% of their time resolving conflict,” Laurina explains. “That’s almost half of their week not spent on growth or innovation.”

Instead of developing their teams, launching projects, or solving customer problems, managers end up firefighting. Dealing with interpersonal issues, misunderstandings, and resistance. It’s a silent drain on leadership capacity.

2. Declining innovation

Innovation doesn’t happen in silence. It requires people to challenge ideas, offer solutions, and speak up when something’s not working.

“When employees feel disconnected, creativity dries up,” says Laurina. “They stop contributing, stop questioning. And that silence is expensive, because it allows your competitors to move faster.”

In industries where innovation is key to survival, disengagement becomes a strategic liability.

3. Silent attrition

Disengaged employees don’t always leave right away. But they check out long before handing in their resignation. “You end up with people who look busy, but contribute far less than they could,” Laurina explains.  

This ‘quiet quitting’ is difficult to spot, but incredibly costly. Output declines. Morale dips. Team culture suffers. And when top performers do leave, you’re left scrambling to understand why.

Red flags leaders should watch for

Disengagement doesn’t happen overnight. While some signs are easy to spot (like a rise in absenteeism or unexpected resignations) many early signals are more subtle. Leaders who know what to look for have a much better chance of acting before the damage is done.

Laurina points to three warning signs leaders should pay close attention to:

• When team members stop sharing ideas openly — even though there’s no visible conflict

• When people stop asking “why” and only focus on “what” and “when”

• When energy starts to drop, before absence or sick leave increases

“If you see these patterns and only measure surface-level satisfaction, you’ll miss what’s really going on,” she warns.

Why CEOs need to lead the engagement agenda

Ultimately, the organizations that succeed aren’t just the ones with the best strategy. They’re the ones with the most engaged people executing it.

And that’s why Laurina believes employee engagement should sit at the top of the leadership agenda.

“It’s not just about HR. It’s about how you recognize people. How you communicate. How you show you’re listening and following through. These are leadership behaviors, not just employee experience initiatives.”

Shifting the mindset from “HR metric” to “business lever” is what enables companies to move from firefighting to long-term, sustainable growth.

And the payoff is clear: stronger teams, faster innovation, and greater resilience. And a workforce that’s energized and aligned with the company’s goals.

“Engagement isn’t fluffy,” Laurina concludes. “It’s one of the most powerful levers we have for performance, retention, and growth.”

P.S In this free guide, we break down four essential strategies used by successful companies to build stronger, more engaged teams. Download The real Cost of disengaged teams — and how to fix it.